Redemption Redemption will require you to have a certain amount of cash up front that you can put towards the balance.  Redemption applies to cases where the property value has depreciated to lower than the amount of the loan.  When this happens the creditor is considered under secured. Essentially, to redeem a debt, you make a payment of the current secured value of the debt. For example, if a debtor owes 10,000 dollars on a vehicle and the vehicle is now only worth 6,000 dollars, the creditor is under secured by 4,000 dollars.  To redeem this vehicle a debtor would make a payment of 6,000 dollars to the creditor.  Then, through filing for bankruptcy, a debtor can eliminate responsibility for the remaining 4,000 dollars as it is unsecured.  After the bankruptcy the debtor will own the property free and clear.  ReaffirmationAnother option for individuals filing for bankruptcy is a reaffirmation agreement.  Reaffirmation agreements can be used on any type of property regardless of the value.  Reaffirmation agreements do not require a lump sum payment.  Rather, a reaffirmation agreement is an agreement to continue making payments under the original loan agreement despite the bankruptcy proceeding.  After the bankruptcy the debtor is still financially responsible for the property and will be subject to repossession or foreclosure if the debtor is unable to remain current on the obligation.  Surrender When filing for bankruptcy a debtor may also choose to surrender property.  A debtor may surrender property regardless of the value of the property or the current amount of the mortgage or the loan.  This option will require you to turn over the property to the trustee, usually at an arranged time.  Surrender allows you to walk away from the bankruptcy not without any further responsibility or obligation to pay for the property.If you have questions, or would like more information, schedule an appointment with a St. Louis Bankruptcy Attorney now. 

A new bill was introduced which would require mortgage companies to respond faster to inquiries about a possible short sale: The Prompt Notification of Short Sale Act. Bankruptcy attorneys know about this issue: a client would like to avoid foreclosure by selling his house to a third party below the mortgage amount. The mortgage company would lose money through a short sale but might receive more money than through a foreclosure. However, the process takes often a long time. Even though someone from the mortgage company talks with the house owner about the short sale process, someone else at the mortgage company might start the foreclosure process. Every so often, we see that clients have to file bankruptcy to stop a foreclosure and have more time for the short sale process.   The legislation is known as the Prompt Notification of Short Sale Act. It will require a written response from the mortgage company within 75 days after the house owner sends a request to the mortgage company.   If the act becomes law, it will not change anything in my opinion because the bill requires only a response from the mortgage company. The response could be that the mortgage company needs more time to review the house owner's request. However, the mortgage company or better: the servicer of the mortgage company can extent the response deadline only once by 21 days.   If the servicer does not respond within 75 days after receiving the written request, the buyer could receive $1,000 in statutory damages. That means the buyer does not have to proof any real damages. Reasonable attorney fees would need to be paid by the servicer as well.   A short sale is favorable for two reasons, the seller avoids a foreclosure on his credit and a short sale is better for the neighborhood. A short sale does not bring down the value of other properties in the neighborhood as a foreclosure normally does.   A short sale normally takes four to nine month to complete. This is not only too long for a potential buyer but it is sometimes too long for the mortgage company itself which might foreclose on the property before the short sale process is finished.   Will the new bill be successful? A similar bill was introduced last year which required a response deadline of 45 days. The bill did not make it to a debate in the house....

When filing for bankruptcy debtors are faced with a number of important decisions.  Throughout bankruptcy a debtor has the option to surrender property, even property that still has a loan balance.  Through bankruptcy a debtor is able to surrender property without penalty or worrying about deficiencies.  However, some debtors may wish to keep certain types of property, i.e. a vehicle.  If a debtor chooses to keep property it would still need to be disclosed on the bankruptcy petition, however, it would be listed that the debtor is keeping the property.  In some cases lenders will require the debtor to sign a reaffirmation agreement.  A reaffirmation is a voluntary agreement that must be filed within 60 days of the creditors meeting or before the case is closed, which ever is sooner.  The agreement will state that the debtor is continuing the loan and will continue to make payments in accordance with the agreement.  If a debtor chooses to sign a reaffirmation agreement the debtor is responsible for that particular debt as if he/she never filed for bankruptcy.  Even if a debtor chooses to sign a reaffirmation agreement the debtor has sixty days after the agreement is filed with the court or the order of discharge to rescind the agreement. Whether a debtor should sign a reaffirmation agreement is a very important decision and there are a number of factors to consider.  Signing a reaffirmation agreement may allow the debtor to keep certain types of property that may be very sentimentally important to the debtor, like a house.  A reaffirmation agreement may allow a debtor to keep very practical types of property, like a vehicle.  When filing for bankruptcy a debtor may be hesitant to surrender property that he/she is not required to surrender. However, in making this decision, a debtor should consider whether or not he/she can actually afford the payment.  A reaffirmation effectively eliminates some of the "fresh start" offered by a Chapter 7 Bankruptcy.  It would be very unfortunate to reaffirm the debt, not be able to continue payments, and eventually lose the property anyways.  Debtors should also consider, even if he/she can afford the debt, whether it is truly worth signing.  In signing a reaffirmation agreement a debtor will incur attorney's fees, fees from the lender, and still have to pay according with the original contract terms.  While debtors may be concerned about acquiring a new vehicle, there are lenders that specialize in helping people that have filed for bankruptcy. If you still have questions about bankruptcy and reaffirmation agreements you can schedule an appointment with a St. Louis Bankruptcy Attorney.

When considering bankruptcy, the most meaningful difference between unsecured and secured debt is that unsecured debt can be discharged.  Secured debt can be discharged, however, any lien on the asset still remains.  Basically, this removes the contractual obligation to pay for the asset is eliminated, however, you still own the asset subject to a the lien.  There me be other options available for certain types of secured debt, like cram down. A secured debt is a debt where the debtor uses an asset as collateral for the loan.  If you do not make payments on the debt as required the lender can take possession of the collateral and sell the item to recover losses if the item is not reaffirmed within 45 days of the 341 hearing.  Until this time, an automatic stay generally protects the debtor from collection or repossession efforts, unless the creditor sucessfully obtains a motion for relief.  The most common examples of this type of loan are a car or property.  Very often the loan is a purchase money security interest, which simply means that the loan is secured by the item that you are purchasing, meaning, if you purchase a car from a dealership with a loan the car is collateral and can be repossessed if you do not pay in accordance with the loan. When an individual has equity in a house or other property it is often possible to take out loans on that equity.  When taking out a loan on equity that debt is considered secured by the home or property in which you had equity, thus not a purchase money security inserest, regardless of what you spend the proceeds on.  Meaning, if you take out a loan based on equity in a house to purchase new furniture for your home that loan is secured by your house.  In the event that you do not make payments on the loan the creditor could attempt to foreclose upon your house.  It is important to remember that even a second mortgage holder may forclose upon your house.  There are many types of secured debt, including, mortgages and liens.  These types of voluntary secured debts are created by agreement of the debtor and the creditor.  It is also possible to have secured debt that is involuntarily created, like a mechanics lien.  Mechanics liens can attach with the consent of the title holder under limited circumstances where property value has been increased by work or materials that have not been paid for by the debtor.  In some courts, depending on both the court and county in which you reside, judgments create liens that may not be dischargable in bankruptcy. Conversely, unsecured debt is a general debt not attached to specific collateral.  The lender cannot take possession of assets to satisfy the debtor's obligation.  Common examples of unsecured debts include signature loans, personal loans, credit card debt, and pay day loans.  It is possible to discharge unsecured debt through bankruptcy.  Generally most unsecured debts can be discharged through a Chapter 7 bankruptcy, with the notable exception of student loans.  Even in a Chapter 13 bankruptcy proceeding, depending on the individuals disposable monthly income as calculated by the means test, it may still be possible to eliminate some or all of the unsecured debt.If you still have questions, make an appointment to speak with a St. Charles and St. Louis Bankrupty Attorney today!

The case of a former corporate officer who demanded to be bought out for an alleged ownership interest and said some really nasty things resulted in a split decision with Fifth Circuit Judges Edith Jones and Catharina Haynes on opposite sides. Matter of Schcolnik, No. 10-20800 (5th Cir. 2/8/12), which can be found here. What HappenedThis statement of facts is synthesized from the two opinions in the case. Each judge referenced facts that the other did not. I am taking both opinions at face value.Scott Schcolnik was Vice-President of Capstone Associated Services, Limited and President of Rapid Settlements, Ltd. Though the owners of the Companies occasionally referred to him as a partner, he allegedly rejected an offer to become an owner of Rapid. Nevertheless, he claimed to be a partial owner and was fired. At this point, things got colorful. Schcolnik allegedly absconded with corporate documents. He threatened to disclose alleged criminal and regulatory violations by the two Companies if they did not “buy out” his “ownership interests.” He threatened a “doomsday plan” if Stuart Feldman, the primary owner of the Companies did not “properly compensate” him for his ownership interests “which appear to be worth in excess of $1,000,000.” He threatened a “massive series of legal attacks . . . which will likely leave you disbarred, broke, professionally disgraced, and rotting in a prison cell.” He also expressed his hope that Feldman would be raped in prison.The nasty grams* were sent on May 25 and 27, 2005. The Companies swiftly moved for a TRO, which they obtained on May 27, 2005. The TRO, which was later extended by agreement, prohibited Schcolnik from carrying out his campaign of mass destruction.*--Nasty gram is a term of art in the Austin Division of the Western District of Texas referring to a particularly vituperative communication. While I am not completely certain, I believe I first heard the expression from Joe Martinec. Six months later, the Companies instituted an arbitration proceeding against Schcolnik, seeking a declaration that he was not an owner. The Companies prevailed on the ownership issue, although the arbitrator noted that the Companies had held Schcolnik out as a partner, which was characterized as “excusable mistakes.” The Companies requested attorney’s fees of $70,000 and received an award of $50,000. The fees were awarded as “equitable and just,” which is apparently a low standard. Schcolnik filed for chapter 7 bankruptcy four days after the state court confirmed the arbitration award. The Companies filed a non-dischargeability complaint under 11 U.S.C. sections 523(a)(4)( and (a)(6). Both parties moved for summary judgment. Bankruptcy Judge Karen Brown granted summary judgment to Schcolnik on both claims. She conducted a trial on the creditors’ objection to discharge and ruled in favor of Schcolnik as well. The Companies appealed the dischargeability findings to the District Court which affirmed. The Majority Opinion—Contumacious and CoerciveThe majority opinion, written by Chief Judge Jones and joined in by District Judge Crone, affirmed the lower court holdings that the claim under section 523(a)(4) was properly denied. Although the Debtor was an officer of the Companies and owed them a fiduciary duty, the debt for attorney’s fees did not arise out of a fraud or defalcation in a fiduciary capacity. Judge Haynes concurred in this ruling.However, the majority opinion found that summary judgment on the willful and malicious claim under section 523(a)(6) was premature. The District Court had found that the Debtor’s behavior was not “willful” as a matter of law because he did not intend to impose litigation expenses on the Companies, a contention they did not dispute.However, Judge Jones pointed out that under Fifth Circuit precedent, an act can be considered “willful” if there was subjective bad intent or “an objective substantial certainty of harm.” The Court noted that “it would seem peculiar to deem an action causing injury not ‘willful’ when the tortfeasor’s action was in fact motivated by a desire to cause injury.” Judge Jones also noted In re Keaty, 397 F.3d 264 (5th Cir. 2005), where sanctions for baseless litigation were found to be a willful and malicious injury. Having laid out this background, Judge Jones reached the penultimate point of her opinion:Shcolnik allegedly engaged in a course of contumacious conduct that required the Appellants to file meritorious litigation against him, resulting in the instant fee award; whereas in Keaty, the debtors pursued the burdensome suit that provoked a sanctions award against them. This is a distinction without a difference, however. It would make no sense for the infliction of expense in litigating a meritless legal claim to constitute willful and malicious injury to the creditor, as in Keaty, while denying the same treatment here to the infliction of expense by a debtor’s attempt to leverage an equally baseless claim through a campaign of coercion. That Texas law may allow the arbitrator to assess attorneys’ fees in favor of a party without specifically finding a willful and malicious injury is not conclusive. If the facts are as Appellants allege, Shcolnik either had the motive to inflict harm or acted so as to create “an objective substantial certainty of harm” to the Appellants. Id.Viewed in light of our precedents, there is a genuine, material fact issue for trial. Shcolnik’s behavior resulted in willful and malicious injury if his claims of ownership were made in bad faith as a pretense to extract money from the Appellants. See Keaty, 397 F.3d at 273 (willful and malicious injury to intentionally “pursu[e] meritless litigation for the purpose of harassment[.]”). The litigation costs he forced upon them are different from the million dollar claim he made against them, but they were neither attenuated nor unforeseeable from his alleged intentionally injurious conduct. (emphasis added).Opinion, pp. 6-7.The Dissent—Insulting and Demeaning Is Not EnoughJudge Haynes concurred in the ruling on section 523(a)(4), but dissented with regard to willful and malicious injury. She cited three grounds for dissent:The effect of the majority opinion is to transform all litigation precipitated by aggressive demand letters into potential “malicious” acts for purposes of nondischargeability. Additionally, the effect of the majority opinion is to allow an end-run around an arbitration proceeding in which both parties willingly participated. Finally, the majority opinion glosses over the lack of connection between the allegedly malicious acts and the arbitration award of attorneys’ fees now sought to be rendered non-dischargeable. Because the bankruptcy and district courts reached the correct result under our existing precedents, I would affirm.Haynes Dissenting, p. 9.Judge Haynes elaborated on her first point as follows:Debtors often come to bankruptcy with judgments against them. It is certainly not an unusual occurrence for parties to make claims in litigation or arbitration that do not carry the day. Nonetheless, the majority opinion transforms the ordinary litigation loser into one who has caused “willful and malicious injury” to another. It does so, apparently, because of the colorful language used by Shcolnik, without the assistance of legal counsel, in his emailed demand letters that preceded litigation which in turn was followed by the arbitration proceeding in question. So, I start there.No doubt the e-mail letters Shcolnik wrote are insulting and demeaning. I would not write such a document nor countenance another to do so. However, we are not here to teach a course in professionalism or civility. The majority opinion transforms incivility into “a campaign of coercion” or “contumacious conduct” by ipse dixit. The question arises – were these “nasty demand letters,” in fact, “coercive” or “contumacious?” We do not have a case setting out a test for where the quintessential demand letter ends and the parade of horrible suggested by the majority opinion begins. Wherever that line is, it is not crossed here, and I disagree with transforming the regrettable unpleasantness and aggressiveness that often attend the prelude to litigation into “coercive” or “contumacious” conduct so easily. Shcolnick’s e-mail letters, however reprehensible they undeniably are, do not. (emphasis added).Haynes Dissenting, p. 10.Between judges, “ipse dixit” is a strong term. Known as the “Bare Assertion Fallacy,” it literally translates as “he himself said it.” It is used to refer to an argument that is made without any support. The terms that were said to be ipse dixit were “coercive” and “contumacious.” “Contumacious” is defined as stubbornly defiant or rebellious, while “coercive” means serving or intending to coerce. While contumacious is closely associated with contempt of court, Shcolnik’s words were no doubt stubbornly defiant, but the question is “So what?” There does not seem to be a logical connection between stubbornly defiant and willful and malicious. Coercive is a more difficult question and I will return to that later.Next, Judge Haynes turned to the results of the arbitration proceeding. Noting the strong federal policy of deferring to arbitration, she pointed out that the arbitrator had only awarded fees as “equitable and just” rather than for wrongdoing, malice or bad faith. She also noted that the arbitrator implicitly found that Shcolnik’s position had some merit when he found that the references to Shcolnik as a partner were “excusable mistakes.” As to the first ground, Judge Haynes is probably wrong. Where a court makes a finding on a lesser standard but does not expressly negate the higher standard, the parties are free to establish whether the higher standard could have been met. Archer v. Warner, 538 U.S. 314 (2003) is not completely on point, but it allowed a plaintiff who had received a promissory note in settlement of a fraud claim to go behind the note and prove fraud in the original transaction. However, Judge Haynes is closer on the second point. If the arbitrator found that the Debtor did not assert a baseless claim, then the Companies would be precluded from relitigating that point in bankruptcy court. Here, the finding is implicit so that it is a close call.Finally, Judge Haynes found that the connection between the nasty emails and the arbitration proceeding was to remote to connect them. She wrote:Indeed, even if the e-mail letters were “coercive” or “contumacious” and even if we ignore the lack of arbitration findings to support the majority opinion, the undisputed facts show that any burden imposed on Appellants by the e-mail letters was quickly removed – the purportedly wrongful documents were sent on May 25 and 27, 2005. On May 27, 2005, the state district court granted a temporary restraining order that was later extended and continued by agreement throughout the litigation and arbitration, barring Shcolnik from taking the actions Appellants claimed put them in immediate fear. It was not until six months later that the matter was referred to the arbitration at issue here, breaking any purported causal connection between the claimed wrongful behavior and the fee award here at issue.Moreover, the lack of causal connection is precisely why the arbitrator made no specific finding of wrongfulness. Indeed, the allegedly wrongful acts caused the arbitration of the ownership/partnership dispute, in which case, the arbitrator’s lack of a specific finding to that effect (and findings inconsistent with that) is meaningful, or they did not, in which case, the alleged “campaign of coercion” or “contumacious conduct” did not cause the attorneys’ fees award.The majority opinion concludes that “Shcolnik’s behavior resulted in willful and malicious injury if his claims of ownership were made in bad faith as a pretense to extract money from the Appellants.” Maj. Op. at 7. The opinion rests on a misconstruction of Keaty. Moreover, it is undeniable that the majority opinion’s conclusion is not supported by the record, the arbitrator’s decision, or, indeed, the events that actually transpired below. As we gave effect to the sanctions in Keaty, we should give effect to the arbitrator’s ruling here. The attorneys’ fees awarded as equitable and just in the arbitration were for resolution of the ownership/partnership dispute, not for anything else.Haynes Dissenting, pp. 13-14.What It MeansThis case is significant for several reasons. The fact that two bright, articulate and conservative judges reached diametrically opposite results shows both the independence of the judges involved and the difficulty of the question. The opinions by Judge Jones and Judge Haynes recall the story of the blind men and the elephant. They are both describing the same thing, but they are describing different parts of it. Judge Jones focused on the apparent intent of the original emails. It is not unreasonable to construe the emails as a blatant attempt at extortion. It would be illegal to demand money in exchange for not releasing damaging information, so the debtor demanded a buyout instead. However, the fact that he demanded a buyout under the threat of destroying his former employer says volumes about his intent. On the other hand, Judge Haynes focused more on the disconnect between the “nasty” emails and the arbitration proceeding. Yes, the emails were reprehensible. However, the campaign was brought to a half within two days and the arbitration was not even commenced for another six months. The Companies would have had a good claim for a willful and malicious injury if the Debtor had actually used the purloined documents to wreak havoc. The Companies probably would have had a good claim for their costs in obtaining the TRO. However, the Companies sought to recover their attorney’s fees for what Judge Haynes characterized as “resolution of the ownership/partnership dispute, not for anything else.” While the ownership dispute may have been commenced for sinister reasons, unlike the sanctionable conduct in Keaty, it was not baseless. I think Judge Haynes has the better argument. While the opening salvos of the campaign clearly could have resulted in willful and malicious injury, they did not. It is like someone who threatens to shoot but after considering the consequences puts the gun down. The conduct could be characterized as a terroristic threat, but it is not murder. Both judges are right to focus on Keaty. However, the important question is whether the legal position taken was baseless. If the position taken, although asserted for ulterior motives, was not baseless, then it should not give rise to a nondischargeable debt.It will be interesting to see whether the en banc court steps in to resolve the dispute.

Often times in the months leading up to filing for bankruptcy individuals try to rectify certain debts or take extreme measures to avoid filing for bankruptcy.  There are numerous things that people commonly do before filing for bankruptcy that may end up causing more problems in the long run.  Some of the most common pitfalls are as follows: 1. Do not take out additional mortgages on your house or loans on retirement accounts to pay off debts.  Often times people take out additional mortgages, which are secured loans, to pay off other unsecured loans like credit cards and medical debt.  This may have a few unwanted implications.  If you take out additional mortgages and are unable to make payments towards that the debt is then secured by your home and debtors may foreclose upon your house to recover the amount owed.  Once your house is foreclosed upon all of your legal rights to the house are lost permanently.  Even if your house is not foreclosed upon the debt which is now secured, and bankruptcy will not eliminate this debt.  At this point, if you wish to protect your house you will have to file a Chapter 13 bankruptcy, which does not modify the ongoing mortgage payments, but would allow you to catch up on arrearages over 48 months. 2. Do not make any payments to family members or friends in the year leading up to filing for bankruptcy.  This rule includes money given as a gift and money repaid, even when owed, to a friend or family member.  This would not include payment of rent if you live with a family member or friend.  The reason you should avoid these types of payments is that any payment made to a family member or friend in the year before filing is considered fraudulent by the Bankruptcy Code, without consideration of the actual merits.  This transfer can then be voided and the trustee may sue your family member or friend to recover the money which may lead to further issues.  While your bankruptcy would discharge the debt the the family member or friend you could certainly opt to voluntarily repay the debt after completion of the bankruptcy. 3.  Do not transfer personal property within the two years leading up to bankruptcy in an attempt to hide assets.  You will be asked about this type of transfer and either the trustee or the courts can avoid the transaction. 4. Do not attempt to pay off particular creditors before a bankruptcy.  If you make a payment of more than 600 dollars to any one creditor in the months leading up to bankruptcy the trustee may void that payment, sue the recipient, and recover that money. 5. Try not to cash out retirement accounts or IRA's unless you truly do not have any other options.  Many retirement accounts are protected by bankruptcy law.  This means that if you do not cash them out they are protected by bankruptcy and they will still be available in accordance with the terms of the account after filing.If you are considering filing for bankruptcy you should speak with a St. Louis Bankruptcy Attorney as soon as possible.

One advantage to filing for a Chapter 13 Bankruptcy is the option to "cram down" certain types of secured debts, including cars, trucks, and motorcycles.  Cramming down quite simply means that the amount owed will be reduced to the fair market value of the items.  Often times the value of an vehicle depreciates much faster than the payments are made.  For example, let's consider that an individual purchased a vehicle in July 2010 for $15,000 dollars.  The monthly car payment is $250 dollars.  For ease of understanding we will exclude interest calculations in the example. In February of 2012 that individual will have paid $5,000 dollars towards the vehicle, leaving a remaining balance of $10,000.  However, in the time the person has owned the vehicle it has depreciated due to normal use and age.  So now, if the car is valued at $7,000 dollars the individual owes $3,000 dollars more than the value of the car.  In a Chapter 13 proceeding it is possible to cram down the amount owed to the fair market value of the vehicle.   Fair market value can be determined by appraisals or commonly accepted authorities, such as Kelley Blue Book values.  It is important to note that where an individual has a substantial amount of equity in the vehicle and they owe less than what the vehicle is worth the individual will be required to pay the amount owed under the loan.  There are certain qualifications for cramming down the amount owed to the fair market value.  The asset must be personal property guaranteed by a secured loan.  This simply means that the creditor can take a vehicle used for personal use in the event the debtor defaults on payments.  The most common example of a secured loan is a vehicle purchased from a dealership.  Furthermore, when talking about vehicles for personal use, the loan must have been taken out more than 910 days prior to filing for bankruptcy to be eligible for cram down.  When a debt can be crammed down it is then rolled into the Chapter 13 reorganization plan and paid back over 36-60 months, depending on the plan you choose.  This means that not only is the amount the individual pays back decreased, but the payments may still be lower as the individual will have more time to make payments.  As with anything in a Chapter 13, at the end of the repayment plan the vehicle is yours and you will not own anything further on the vehicle. In the example above we ignored interest for ease of calculation and understanding.  However, when a debt is crammed down interest will still be calculated, though it will not be the amount of interest on the original loan.  Missouri uses the formula approach to calculating interest on the loan.  The court will first look at the national prime rate for credit worthy lenders.  The court will then adjust that rate to account for the increased risk a non-payment with a debtor in bankruptcy and will account for duration of the plan, feasibility of the plan, and the type of security. There are a few more things to consider concerning cram down.  If there is a co-signer on the loan who is not a part of your bankruptcy, i.e. a friend, parent, or significant other, the cram down will not apply to that persons obligation.  Using the example above, if our debtor had a co-signer that was not a part of his bankruptcy the debtor would only owe $7,000 dollars, however, the co-signer will still be responsible for the full 10,000 left on the loan.  This means that creditors can take action to recover the $3,000 difference between the cram down and the original loan value from the co-signer.If you still have questions about cram down contact a St. Louis Bankruptcy Attorney today. 

You find the new bill introduced by Senator Crowell here:http://www.senate.mo.gov/12info/pdf-bill/intro/SB683.pdf Among  other things, the new bill will include earned income credits as being exempt from creditors. This can be helpful in filing for bankruptcy when the tax refund comes in and someone has to turn over a portion of the tax refund to the trustee. The Earned Income Tax Credit will be exempt. The remaining part of the tax refund might be exempt by applying other exemption or by planning the time of the bankruptcy filing.  

Many people who are considering bankruptcy may also be in the process of losing their home due to foreclosure. In fact, oftentimes, these two situations are closely related. Yet, depending upon your circumstances, you could actually be able to save your home from foreclosure – or at least delay the process - by filing for bankruptcy. This could be tricky, however, and it is highly advised that you seek the advice of an attorney before moving forward. How the Procedure WorksFirst, it is important to understand the primary types of bankruptcy and how each can affect your debt repayment obligations. The two types of bankruptcy that are filed by individuals include Chapter 7 and Chapter 13. Chapter 7 BankruptcyFiling a Chapter 7 bankruptcy will completely cancel all of the mortgage debt – including second mortgages and home equity loans – that you owe on. You want to differentiate two things here which is causing some headache to understand for most people. There are two different rights your mortgage company has. One is the right to demand payment for you that is based on your contract (the note) which says you pay to the mortgage company a monthly amount. You don’t have that obligation anymore after filing for bankruptcy. However, you also pledged your home as security to the bank in the case you don’t pay anymore (the mortgage). That’s means you can stop paying if you are willing to surrender (meaning giving it back to your mortgage lender) your home. If you want to keep it, you still need to continue paying on it. Chapter 7 bankruptcy will also usually eliminate your unsecured debt such as credit card balances.By going with a Chapter 7 bankruptcy proceeding, you can keep your home, car and any other personal property you own. However, this filing may very well postpone foreclosure, giving you some additional time to find alternate living arrangements if you choose to surrender your home. In many cases, the procedure for Chapter 7 bankruptcy takes around four months. You can remain in your home until the mortgage company forecloses on your home. Foreclosure will change title to your home, meaning someone else owns the home. In some instances, the procedure may take longer. Chapter 13 BankruptcyIf you opt for – and are eligible for – Chapter 13 bankruptcy, you may have a chance to save your home from foreclosure. This is especially true if you are able to make up missed mortgage payments in the future. This bankruptcy option allows you to essentially restructure your existing debts. Therefore, with a Chapter 13, you may be able to make up for missed mortgage payments over a certain period of time. This time frame is in the St. Louis area (Eastern District of Missouri) three years. In the St. Louis Metro East area (Southern District of Illinois), you can stretch out the arrearage over up to 5 years. Proceed With CautionMany people will do whatever it takes in order to save their home. If, however, for some reason you are unable to keep up with the mortgage payments during the repayment time frame, your mortgage lender could ask the court to lift your bankruptcy protection and subsequently start the procedure of foreclosure again. Therefore, it is important to be sure that you will be able to afford the mortgage payments when putting together your debt repayment plan.Before moving forward with any option, it is a good idea to speak with a qualified attorney who specializes in the area of bankruptcy. This way, you will be more assured of getting the correct advice that will work in your specific situation as well as that is in compliance with the laws in your particular state of residence. Our attorneys in the St. Louis and Metro East area offer a free consultation.

Filing for bankruptcy can be a very personal and emotional decision.  You are probably worried about a number of things, including what filing for bankruptcy will do to your credit now and in the future. Bankruptcy certainly will affect your credit, but it is important to realize that if you are currently considering bankruptcy, your credit is probably already suffering. To truly understand the impact that debt, late payments, and even bankruptcy have on your credit it you first must understand how credit is calculated.  Credit is calculated by evaluating five different areas, including: payment history, amounts owed, the length of your credit history, and new credit, and the types of credit you use.  Your payment history accounts for about 35% of your credit score and the amounts owed accounts for about 30% of your credit score, for a combined total of about 65%.  If you are currently making all of your minimum payments on time you are doing well in that area, but depending on how much debt you have your credit may still be lower than you would like.  If you are not currently making your minimum payments on time and you owe a substantial amount of money your credit score is taking a hit in both areas.  It is also important to remember that the types of credit your use affect your score, so if your debt is primarily consumer your credit score may be negatively affected.  Bankruptcy can eliminate your unsecure debt.  This means that you will not owe any money and you will not continue to take negatively affect your credit every month with late or missed payments.  In fact, filing for bankruptcy actually increases some individual's credit scores.  Even for those individuals that do not see an immediate credit score increase, we can provide you with advice on how to begin to improve your credit after filing for bankruptcy.  Many people like to have a credit card available for emergencies or unexpected expenses.  Others prefer to charge small amounts monthly, like gas, and then pay the balance in full each month.  Whatever your preference, you are likely curious about obtaining credit after bankruptcy and when you are eligible for more credit.  In many cases, after you file for bankruptcy, you will begin to get a number of unsolicited credit card offers in the mail.  You should be wary of these offers.  A lot of times, though they offer to help you rebuild your credit, these are not good offers.  Many of those credit cards charge annual fees, usage fees, and have high interest rates and you will likely have a large balance right away.  If you want to rebuild your credit you should ask your St. Louis Bankruptcy Attorney for a referral or make an appointment with your bank or credit union to discuss the best options for you.